Angela Aull

Metro Atlanta Real Estate

What is a Down Payment Gift and Who Can Give it?

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When it comes to buying a home, one of the most significant hurdles many first-time buyers face is the down payment. However, a down payment gift can alleviate some of that burden. Understanding what a down payment gift is and who can provide one can make the home-buying process more accessible.

What is a Down Payment Gift?  A down payment gift is a sum of money given to a homebuyer to help cover the down payment on a property. This financial assistance can come from various sources, and it does not need to be repaid. Typically, down payment gifts are used by first-time homebuyers or those who may not have enough savings to cover the upfront costs of purchasing a home.

Key Features of Down Payment Gifts
1. No Repayment Required: Unlike loans, down payment gifts do not have to be paid back. This can significantly ease the financial strain
on buyers.
2. Documentation Required: Lenders often require documentation to confirm that the funds are indeed a gift, not a loan. This can include a
gift letter from the donor stating the relationship to the buyer and confirming that the funds are a gift.
3. Source of Funds: Many lenders may also ask for proof of where the gift funds are coming from to ensure they are legal and legitimate.

Who Can Give a Down Payment Gift? Several individuals or entities can usually provide down payment gifts, depending on the lender requirements and terms. Here are some common sources:
1. Family Members: Family members are the most common source of down payment gifts. Parents, grandparents, siblings, and other relatives can provide financial assistance to help their loved ones achieve homeownership.
2. Close Friends: In some cases, close friends may also contribute to a buyer’s down payment. However, this is less common and may require additional documentation to clarify the nature of the gift.
3. Employers: Some companies offer down payment assistance programs as part of their employee benefits. Employers may provide gifts or grants to help employees with their home purchase.
4. Non-Profit Organizations: Certain non-profit organizations are dedicated to helping individuals and families achieve homeownership. They may offer down payment gifts, grants, or assistance programs tailored for specific communities or demographics.
5. Government Programs: Various government programs exist to assist first-time homebuyers, including down payment assistance in the form of gifts. These programs can vary by state or locality, so it’s essential to research what’s available in your area.

Benefits of Down Payment Gifts
1. Increased Buying Power: With a down payment gift, buyers can increase their purchasing power, allowing them to qualify for a mortgage they might not have been able to secure otherwise.
2. Lower Monthly Payments: A larger down payment can lead to lower monthly mortgage payments and potentially eliminate the need for
private mortgage insurance (PMI).
3. Access to Better Loan Terms: Putting down a substantial amount can improve a buyer’s chances of securing better loan terms, such as
lower interest rates.

A down payment gift can be a valuable resource for homebuyers, especially those navigating the challenging waters of purchasing their first
home. Understanding the concept of down payment gifts and knowing who can provide them can help buyers leverage this financial assistance effectively. If you’re considering a down payment gift, it’s wise to communicate with your lender about their requirements and ensure all necessary documentation is in order. With the right support, achieving homeownership can be a more attainable goal.

The Down Payment Assistance You Didn’t Know About

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Believe it or not, almost 80% of first-time homebuyers qualify for down payment assistance, but only 13% actually use it. And if you’re hoping to buy a home, this is a mission-critical gap to close – fast (see graph below):

No Caption ReceivedHere’s what you need to know to make the most of your down payment in today’s housing market.

Amplify Your Down Payment Potential

For first-time buyers, the name of the game with down payments is making sure you’re taking advantage of all the resources out there designed to help you. And a bunch of them can get you to your goal faster than you may have thought possible.

For example, there are loan options that require as little as 3% down, or even 0% for certain qualified borrowers, like Veterans. And let’s not forget down payment assistance, like grants and other opportunities, that help you cover the upfront cost of your down payment.

If you’re interested in exploring those options and what you may be able to use to your advantage, connect with a trusted lender. Because if you don’t at least see what’s available, you could be leaving money on the table and missing your chance at buying a home. These resources can boost your down payment. And a higher down payment could help lower your eventual monthly mortgage payment, and even avoid or reduce your fees like private mortgage insurance.

Don’t Let News Headlines About Down Payments Scare You

There’s one more thing to address. News coverage has been talking about how the typical down payment is rising. A report from Redfin states:

“The typical down payment for U.S. homebuyers hit a record high of $67,500 in June, up 14.8% from $58,788 a year earlier . . . This was the 12th consecutive month the median down payment rose year over year.”

But don’t let those high dollars scare you. Just because the average down payment is rising doesn’t mean down payment requirements are going up. That’s a key piece of the puzzle to understand. It’s really just because people are choosing to put more down to try to offset higher mortgage rates, and current homeowners who are putting their equity to work are using that to increase their down payment on their next home. As HousingWire explains:

“. . . buyers are putting down a higher percentage of the purchase price to lower their monthly mortgage payment. And buyers also had more equity from their home sales, which gives them more cushion.”

Let’s break those two reasons down a bit:

1. A bigger down payment helps lower your monthly mortgage payment. Affordability has been a challenge for many buyers recently, which is why those who have the ability to make a bigger down payment are going to do so in an effort to lower their future housing costs.

2. Buyers who already own a home have a record amount of equity to leverage. Someone who bought a home a few years ago has gained a significant amount of value in their house, thanks to home price appreciation. These people can put down much more than the average first-time buyer who hasn’t owned a home yet.

Bottom Line

What’s the best thing to do? Talk with a trusted lender about your options. They’ll help you figure out where you stand today and how to access the resources you may qualify for. Because help is out there, you just need to work with a pro to take advantage of it.

Falling Mortgage Rates Are Bringing Buyers Back

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If you’ve been hesitant to list your house because you’re worried no one’s buying, here’s your sign it may be time to talk with an agent.

After months of high rates keeping buyers on the sidelines, things are starting to shift. Rates are already coming down due to a number of economic factors. And yesterday the Federal Reserve cut the Federal Funds Rate for the first time since they began raising that rate in March 2022. And while they don’t control mortgage rates, this sets the stage for mortgage rates to fall even further than they already have – especially since more cuts from the Fed are expected into next year. And lower mortgage rates are bringing more buyers back into the market. Lisa Sturtevant, Chief Economist at Bright MLS, says:

“A drop in the cost of borrowing will help fuel more homebuyer demand . . . Falling rates will also bring more sellers into the market.”

The best part? You can take advantage of that renewed buyer interest.

As Rates Fall, Buyer Activity Goes Up

The graph below illustrates the relationship between falling mortgage rates and rising buyer activity. The orange line represents the average 30-year fixed mortgage rate, while the blue line shows the Mortgage Bankers Association (MBA) Mortgage Application Index, which tracks the number of mortgage applications.

As you can see, as mortgage rates (orange) come down, the Mortgage Application Index (blue) rises, showing more people start to re-engage in the process (see graph below):

What This Means for You

According to the National Association of Realtors (NAR), home sales increased in July, which was a welcome shift after four straight months of declines. If you’re a homeowner thinking about selling, this uptick in buyer activity works in your favor.

More buyers means more competition, which can lead to higher offers and shorter time on the market for your house. And, according to Edward Seiler, AVP of Housing Economics at the Mortgage Bankers Association (MBA), this trend is expected to continue:

“MBA is expecting that slower home-price appreciation, coupled with lower rates, will ease affordability constraints and lead to increased activity in the housing market.”

All in all, the market is becoming more accessible to a wider range of buyers, which could result in even more people looking to purchase a house like yours.

With more buyers entering the market, now’s the time to start getting your house ready to sell.

Bottom Line

The recent decline in mortgage rates is already driving more buyers into the market, and experts project this trend will continue. Let’s work together to take advantage of this increased buyer demand and get your house ready to sell.

Finding An Affordable Home in a Great Neighborhood

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You have heard it a million times, “buy the worst home in the best neighborhood.” While you do not necessarily want to buy a home straight out of a horror film, finding an affordable home that might need some updating or repairs in a GREAT neighborhood is a great strategy in a tight real estate market. With some strategic planning, it is possible to find a great home that will accrue value over time because it’s located in a great neighborhood.

The first step is to define what a “great neighborhood” means to you and your family. Of course, the basics such as low crime and great school are a good start, but you also want to consider amenities that affect your quality of life and lifestyle. Do you want easy access to recreation facilities or trails for example? Once you identify the essential qualifications of a “great neighborhood” for you, then start doing your research.

Real estate and community websites are a great start. Social media sites can also offer insight into the lifestyle of the communities you are considering. Review the prices of current listings and consult with your lender to determine a realistic budget. Then be open to compromises. What are the true “must have” aspects and what would you simply “like to have”? Be ready to pounce if a good home becomes available.

Be open and honest with your budget and goals. Working with a real estate agent, they may offer similar communities as well. These could be good starter locations that offer value accretion. Finally, be ready to make updates and repairs. Finding a diamond in the rough will take work and elbow grease but in the long run, you can find significant financial and personal reward from investing in the right neighborhood.

How to Find a Pet-Friendly Neighborhood

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In a tight housing market, finding the right home for you and your family may feel like a needle-in-the-haystack effort. Add to this the need for a pet-friendly neighborhood and you may feel like it is impossible. The good news is that more communities are considering our furry family members when planning or improving their amenities. Finding the right location ensures that your pets are safe and happy.

First, if you are considering a home in a planned community or association. Carefully read the rules, restrictions, and policies. While most local laws prohibit properties from banning pets, they can limit the number and type of pets. Make sure your furry friend meets their requirements.

The home itself should be in a safe environment also. If your pet will spend time outdoors, either playing in the yard or chasing a ball, look for communities with low traffic and well-lit streets and parks.

Next, observe the community. Take a drive and look for green spaces, dog parks, and trails. Spend time learning the rules, such as leash laws, day availability, or breed restrictions. Ensure they are maintained, and that people are complying with the posted rules.

Finally, check for local pet services such as pet supply stores, grooming salons, boarding kennels, and veterinary clinics. Easy access to these facilities is important for your pets’ well-being and health. By focusing on these aspects, you will find a neighborhood where both you and your pet will thrive.

Don’t Let “As Is” Scare You!

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Seeing “as is” on a home listing can make some homebuyers nervous. The first thought often is, “what’s wrong with the home”? In fact, the term “as is” should not scare you away from a home that otherwise looks like a good fit. Understanding the term, its use, and how to approach the situation can lead to a great deal and good investment.

First, “as is” does not necessarily mean “fixer-upper,” even though this is a common belief. Most often, the term “as is” is simply the seller’s way of letting prospective buyers know that they do not want to be bothered making minor repairs.

Writing an offer on an “as is” listing does not mean that you agree to take the home in any condition, nor waive your right to have inspections. It’s important to do thorough inspections and investigations of any home you consider buying. After carefully reviewing the condition of the home, you can still request repairs or credits during your inspection period, even on an “as is” home listing. The sellers may or may not agree to do some repairs for major issues to ensure the conclusion of the sale.

Finally, some homes are in such poor condition that the “as is” description is a true warning. These homes may not qualify for traditional financing and require serious consideration about the cost and effort to repair. Most of the time, if the home appears to suit your needs, you can feel confident moving forward with the process. “As is” does not need to be scary and it does not mean you can’t still make informed decisions after an inspection.

Angela Aull | HomeSmart

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